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But they had not got the wrong man, in fact he was the subject of an elaborate sting operation by MI5 - Britain’s spy-catchers had caught a traitor.

Houghton, sources said, was a young computer “geek” on the make, living the fantasy of a James Bond spy.

“He wanted to live a champagne lifestyle on gingerbeer wages,” one said. Another said: “He knew he had a valuable secret and wanted to make money out of it. His motivation was essentially greed.”

He now claims that he was hearing voices that told him to carry out his plans, but sources dispute this.

Houghton was born in the Netherlands where he lived for the first six years of his life with his brother and two sisters, until his parents split up.

He was brought up by his mother, Elizabeth, and Dutch step-father, Walter, on a small holding in Holne, near Newton Abbot in Devon where he joined the South Dartmoor Cyclists Touring Club as a teenager.

His life varied little from that of thousands of other youngsters as he followed a path from school in Newton Abbot, to a graphic design course in Exeter and eventually to a computer course at Birmingham University.

There his knowledge of computers made him perfect material for recruitment to MI6’s graduate programme.

Unfortunately, his love of fantasy role playing computer games, also made him their worst nightmare.

Houghton moved into a shared flat in Hoxton, a trendy but down at heel part of East London.

He made an inconspicuous character in a suit and tie, traveling into Vauxhall Cross, MI6’s “legoland” building on the South Bank every day.

There he spent 20 months working on developing email intercept techniques in a joint project for MI5 and MI6.

But Houghton was not content with his dull job as a computer expert, fancying himself instead as something of a real-life spy.

He began burning files onto CDs and DVD disks which copied onto a secure digital memory card that he took home and stored under his bed.

One Sony memory card later found at his flat contained around 7,000 files, including deleted files.

There was also a portable hard drive and hard copies of documents marked “top secret,” “secret” and “restricted.”

Nine MI5 operation files related to the intercept project and one staff list contained details of over 300 named officers, while another had the home and mobile telephone numbers of 39 officers.

Houghton had determined to use state secrets to make his fortune and left MI6, apparently on good terms, in May last year to work as a graduate trainee for Lloyds Bank.

Three months later he used his own mobile phone to call the Dutch intelligence service, the AIVD, using a number he had found on the internet.

The Dutch were at first disbelieving that he was who he said he was and it took him several phone calls over the course of the next few months to persuade them he really did have top secret material for sale.

Many other intelligence services would not have been as co-operative but the Dutch immediately phoned their British counterparts and MI5 set up a sting operation.

Undercover MI5 and Dutch officers arranged to meet him on February 8 to view the material on his laptop while recording the meeting with hidden listening devices.

Houghton initially demanded £2m for the files on intercept techniques and sought to drive up the price by offering the two lists containing details of staff he had worked with at MI5 and MI6.

After some haggling he eventually agreed a price of £900,000 and they arranged to meet him again at a central London hotel on March 1 where he showed them the material on a laptop and then handed over two memory cards and a computer hard drive. Once again the meeting was covertly recorded

Believing he had successfully pulled off the deal, he was allowed to leave the hotel room with the cash in a suitcase, making it to the hotel lift before he was arrested by plain clothes officers from the Metropolitan Police Counter Terrorism Command.

What he was leaking was not trivial information. In the hands of another intelligence agency, a staff list of the members of MI5 and MI6 would have been vital material for launching entrapment operations and the intercept techniques our security and intelligence services have developed is valuable information.

In the wrong hands it could have had “severe impact on operational capabilities and particularly the ability to collect intelligence,” one source said.

Houghton's lawyer Michael O'Kane said: "One can think of a handful of foreign intelligence services to which the information could have been disclosed which would send a shiver down the spine of everyone in this courtroom. The Dutch do not fall into that category."